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U.S. Rep. Mike Kelly lashes out at the IRS as Biden proposes billions in funding for the agency,
WASHINGTON — Two years ago, U.S. Rep. Mike Kelly, R-Butler, joined the late U.S. Rep. John Lewis, DGa., to push through the first Internal Revenue Service reform legislation since 1998 that aimed to recast the beleaguered tax agency as a customer service operation that helpsAmerican taxpayers.
Today, Mr. Kelly has vented frustration at the agency’s sluggish performance in processing tax returns, the leaking of tax records to journalists, and what he views as political crusades against conservatives.
Mr. Kelly, a top member of the powerful House Ways and Means Committee, has joined other Republicans in objecting to proposals from President Joe Biden and congressional Democrats to provide $80 billion over 10 years tothe IRS as a way to pay for a bipartisan infrastructure packageunder negotiation.
The committee, the chief tax-writing panel tasked with exploring the “ways and means” of generating revenue, is gearing up to consider annual budget bills and an infrastructure package workingthrough Congress.
Democrats argued the funding proposal would level the playing field by empowering the IRS to crack down on wealthier Americans who are cheating the system. Some hundreds of billions of dollars of taxes go uncollected each year by the agency, though estimates vary widely on how much more the agency would collect if it were to receive more funding.
In an interview last week, Mr. Kelly said he hasn’t seen justification that the plan would work and that the agency has not shared details on how it would spend additional funds.
“Do they need more money? I don’t know that I’ve ever seen someone come up with a plan saying: Here’s what we need, here’s where we need it, and, by the way, this is stuff that’s obsolete and we no longer will be doing it,” Mr. Kelly said.
A Treasury official said in an interview that IRS funding has clearly not kept pace with the demands of the job. IRS funding has been cut by 20% in the past decade, and 20,000 people are projected to leave the IRS through attrition in the next several years. Some 15% of taxes go uncollected each year, mostly from higher-income-individuals.
The official said the agency has provided details that show, in part, additional resources would train a new generation of skilled workers, better customer service, and an upgrade to 50-year-old IT systems.
Infrastructure disputes
Mr. Kelly said he supports an infrastructure bill that would target improvements on physical systems like roads, bridges, airports, the power grid and an expansion of broadband. Those items were included in a bipartisan framework the White House and a group of Senate Republicans have been negotiating overthe past month.
He also vented frustration at the move by Democrats to fold in progressive priorities ininfrastructure measures.
“In order to get that 9 or 10 cents of actual infrastructure, there’s another 90 cents that’s going to go to something you’ve never heard of and, quite frankly, never would have considered as infrastructure,” Mr. Kelly said.
Mr. Biden, during his joint address to Congress in April, unveiled his idea to bolster the IRS as a way to pay for things like universal prekindergarten, a federal paid leave program, child care, free community college, and
home- and community-based services for seniors and people with disabilities.
The $80 billion would amount to an almost 70% increase over the agency’s funding in recent years, though annual funding would increase in the last years of the decade. The administration estimates additional revenue from enhanced IRS collections would total about $700 billion over thenext decade.
The IRS funding proposal was seen by some as a more bipartisan way to raise revenue than the proposal to hike the corporate tax rate to 28% from 21%, which would partially undo the 2017 GOP tax cuts that lowered the rate from 35%. Republicans like Mr. Kelly, who was instrumental in passing those tax cuts, refused to consider that.
Alex Muresianu, a federal analyst at the Tax Foundation, a right-leaning research institute based in Washington, said there is a “consensus” that “giving the IRS more than it currently has would raise more revenue is prettyreasonable.”
“But the question is, can you get, say, $700 billion out of increasing the IRS’ budget?” Mr. Muresianu said. “Or is the realistic range for the amount of revenue you could get closer to $100 billion or $200 billion?”
Pulling support
If there was any initial support, Republicans largely turned against it.
To Mr. Kelly, the 2019 IRS reform bill put the agency on a path to running more like a business — which is how the former used car salesman thinks the government shouldrun.
Backlogs of tax returns and, in the past year, delayed COVID-19 relief checks, were leaving a lot of unhappy customers and inundating his office with constituent calls.
During a hearing in February, Mr. Kelly struck a positive tone, saying the IRS “worked tirelessly” despite being “overloaded and overwhelmed” to distribute some 307million payments totaling $413 billion directly to Americanssince last March.
He called for an amendmentto
the American Rescue Plan that would require the IRS to open a customer service process to resolve taxpayer claims around the COVID-19 relief checks. That amendment was withdrawn with plans to fold it into separate legislation.
Then, in early June, ProPublica published a story that showed some of the richest people — including Jeff Bezos, Elon Musk, Michael Bloomberg, Carl Icahn and George Soros — managed to avoid federal income taxes. ProPublica cited a “vast trove” of leaked IRS data on the tax returns of “thousands of the nation’s wealthiest people.”
That leak infuriated Mr. Kelly, who took to the floor last week to call it an “outrageous criminal act” to aid a “left-wing propaganda outlet ... in pursuit of a political narrativeon tax policy.”
“This is an astonishing breach of trust that should cause every American to wonder if his or her tax records could be weaponized against them,” said Mr. Kelly, who is the top Republican
on the Ways and Means’ oversight subcommittee.
He explained the 2019 bill was to make the IRS “a resource rather than an adversary.”
“But how can an agency that takes years to process tax returns, leaks private financial records to damage certain taxpayers and wields its vast power to punish people or organizations with certain political or religious views be seen as anything other than an adversary?”he said.
The Treasury official said the IRS takes leaks very seriously and the IRS is doing everything it can to get to the bottom of the criminal activity. Taxpayer privacy, including an upgrade to the agency’s security protections, is a major plank of the additional funding the IRS hasasked for.
In the interview, Mr. Kelly said he remained unsure if a bipartisan deal on revenue for infrastructure would emerge.
His distaste with Democrats’ broader infrastructure ideas spurred him to vote against a $547 billion surface transportation bill this month that directed $20 million to six projects he handpicked and successfully got into the bill.
“They put a hell of a lot more stuff in the basket that didn’t make sense to me, and I’m not falling in that trap,” Mr.Kelly said.
Asked how he would pay for projects, he suggested a reliance on user fees, like turnpike tolls, would be prudent place to start.
“You have to be able to derive revenue off it, so where does the revenue come from? End users always are the ones funding it,” Mr. Kelly said. “It’s just a basic business model, isn’t it? I mean, how’s it different than any otherbusiness?”